CIO’s Most Common Cost-Cutting Mistakes and How to Avoid Them

If there is one word that any CIO hates, it’s budget. In a perfect world, the IT department would have unlimited funds available, allowing them to purchase all of the hardware, software and personnel that they need to ensure that the network is fast, reliable and secure.

Unfortunately, we live in the real world, and more often than not, CIO’s are faced with shrinking, rather than growing budgets, and directives from their bosses to trim costs. Rarely are those cuts easy to make, since usually cost-cutting comes with reductions in service, staff or features that employees have come to rely on.

CIO’s Cost-Cutting Mistakes and How to Avoid Them

Compounding the problem is that many CIO’s don’t always make the best choices when it comes to making cuts. They look for the low-hanging fruit or follow trends instead of critically assessing their situation to find cuts. In the end, these mistakes often end up costing more in the long-run, in additional equipment purchases, stopgap fixes and downtime — and in some cases, in more intangible ways, such as negative public perception.

Shortsightedness

Perhaps the greatest mistake that CIO’s make in trimming the budget is not looking at the long-term impact of trimming costs. They are so focused on meeting budget now that they don’t consider the future the overall strategic goals of the department and the organization. In the end, what appears to be an immediate cost savings (reducing staff, for example) ends up costing more in the long-run when you need to employ expensive independent contractors to do the work that could once be accomplished in-house.

Not Considering the Whole Organization

Budget cuts often have an equivalent effect on the morale of the organization— that is, morale often declines when employees know that the belt’s getting tighter. Cutting IT can also affect productivity; when equipment is old or not running up to expectations, workers can’t get their jobs done and productivity declines. When considering cutting costs by keeping old equipment, or laying off staff, think about how the move will impact the organization as a whole and whether the move will cause greater harm than good.

Thinking Cheapest is Best

While you might be tempted to purchase the cheapest equipment you can find, remember that the lowest price doesn’t always equal the best fit. When evaluating potential expenses, consider the overall cost before making a decision. A particular piece of hardware might be inexpensive, but how reliable is it? Are you going to spend more on repairs and maintenance? It may be worthwhile to devote more money to quality, have the item last longer, and work properly without intervention than to purchase the cheapest option — and have to replace it sooner and spend twice as much.

Not Replacing Old Equipment

Speaking of replacing equipment, sometimes attempting to cut costs by limping along with old equipment backfires. Instead of budgeting for a replacement that works, you’re caught off guard when your existing equipment fails — and have to make an unplanned purchase that negates any savings.

Carefully assess your existing equipment and consider whether it needs to be replaced sooner rather than later. Check out a site like http://www.xbyte.com/ to find high quality refurbished IT equipment; there’s no reason to hang on to outdated or poorly performing machines when you can replace them with like-new models for a reduced price.

Relying Too Much on Automation

Some CIO’s look at automation as a replacement for employees; in other words, by allowing technology to handle some of the tasks normally handled by workers, they can let staff go and reduce those costs.

The problem is that automation is only meant to make certain tasks easier, and not to replace people. It allows the highly skilled workers to focus on higher priorities — priorities in line with strategic goals — instead of menial tasks. Therefore, when a CIO uses automation as a tactic to reduce costs, he or she effectively torpedoes any organizational growth, as either there won’t be anyone available to take on growth projects, or the costs of consultants and freelancers will increase.

Following Trends

“We can go to the cloud, it will save us money.” “Everyone else is using virtualized servers.” These are just some of the trends that can cost your company money if you don’t manage them properly. Before jumping on a bandwagon with the expectation that it will reduce expenses, do your homework and see how it will work for your individual organization. The latest and greatest trend isn’t always the most cost-effective choice, and following trends blindly could negate any cost savings.

Trimming the budget is never fun, but often necessary. If you’re faced with this onerous task, do it carefully and thoughtfully to avoid causing more costly long term problems.

About the author

Harshil Barot

Harshil Barot is a Computer Geek, Internet Entrepreneur, Blogger, Day Dreamer, Business Guy, Fitness Freak, Music Lover and Digital Marketing Specialist. He also helps companies to grow their online businesses. At Just Web World he Writes about Blogging, WordPress, SEO, Business, Technology and Computer Tips and Tricks.